Yahoo Finance American Water's (AWK) Kentucky Arm to Invest in Upgrades
American Water Works AWK recently announced that its unit, Kentucky American Water, will invest $1.6 million in 2023 to upgrade and maintain two of its water storage tanks. The necessary upgrade and maintenance of the water tanks will assist the company in protecting water quality and increasing the effective service life of the storage tanks. Kentucky American Water owns and operates 26 water storage tanks throughout its service area.
Over the past few years, Kentucky American Water has invested more than $100 million in infrastructure improvements, such as replacing aging water pipes, upgrading water treatment facilities and refurbishing water storage tanks. Tanks undergo inspections every five years with more extensive refurbishment conducted every 15 to 20 years. It is essential to ensure proper maintenance of the water infrastructure, which allows the company to maintain its 24x7 high-quality water services for its customers.
Systematic Investments Essential for Water Industry
Aging water and wastewater infrastructure is a concern for the water industry. It is evident from the findings of the American Society of Civil Engineers (ASCE) that due to the delay in pipeline repairs and maintenance, 6 billion gallons of treated water is lost every day in the United States. So, delays in the repair and maintenance of the storage water tanks could increase the problem further.
Per the U.S. Environmental Protection Agency, investments of $473 billion and $271 billion are necessary to maintain and expand drinking water and wastewater pipelines, respectively, to meet demand over the next 20 years. Water infrastructures like storage tanks and purifying units, need maintenance at proper intervals.
American Water Works is making regular investments to maintain its infrastructure. It aims to invest in the range of $14-$15 billion in the 2023-2027 period and $30-$34 billion for the 10 years of 2023-2032. Last week, Pennsylvania American Water decided to invest $17.5 million in 2023 to upgrade and maintain eight of its water storage tanks and construct five new tanks to cater to the rising demand for water.
Utilities Making Investment
Given the above-mentioned scenario, it is evident that systematic investments to upgrade and maintain the old infrastructure, as well as making provisions for adding new infrastructure, will assist the operators in meeting the rising customer demand.
Water utilities like Essential Utilities WTRG, California Water Service Group CWT and Middlesex Water MSEX have well-chalked-out capital investment plans to strengthen their infrastructure.
Essential Utilities plans to invest $1.1 billion in 2023 and $3.3 billion through 2025 to improve the water and natural gas systems and better serve customers using improved information technology. The Zacks Consensus Estimate for WTRG’s 2023 earnings indicates year-over-year growth of 5.1%. The long-term (three- to five-year) earnings growth of WTRG is currently pegged at 5.6%. The current dividend yield of Essential Utilities is 2.8%.
California Water Service plans to invest more than $725 million in capital expenditures through 2024. The Zacks Consensus Estimate for CWT’s 2023 earnings indicates year-over-year growth of 4.5%. The current dividend yield of California Water Service is 1.9%.
Middlesex Water plans to invest $266 million during 2023-2025 to strengthen its water and wastewater infrastructure and provide services to customers in a safe, reliable and efficient manner. The Zacks Consensus Estimate for MSEX’s 2023 and 2024 revenues indicates year-over-year growth of 5.9% and 4.7%, respectively. The current dividend yield of Middlesex Water is 1.6%.
Price Performance
Shares of AWK have rallied 3.7% in the past three months compared with the industry’s 3.2% return.
Image Source: Zacks Investment Research
Zacks Rank
American Water Works currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
California Water Service Group (CWT) : Free Stock Analysis Report
Middlesex Water Company (MSEX) : Free Stock Analysis Report
Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
